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United States Government Accountability Office:
GAO:
Report to the Chairman, Subcommittee on Surface Transportation and
Merchant Marine Infrastructure, Safety, and Security, Committee on
Commerce, Science, and Transportation, U.S. Senate:
March 2012:
Commuter Rail:
Potential Impacts and Cost Estimates for the Cancelled Hudson River
Tunnel Project:
GAO-12-344:
GAO Highlights:
Highlights of GAO-12-344, a report to the Chairman, Subcommittee on
Surface Transportation and Merchant Marine Infrastructure, Safety, and
Security, Committee on Commerce, Science, and Transportation, U.S.
Senate.
Why GAO Did This Study:
Studies have estimated that transit travel demand between New Jersey
and Manhattan will increase by 38 percent by 2030. The Access to the
Region’s Core commuter rail project was designed to help meet that
rising demand. In October 2010, the governor of New Jersey, citing
potential cost growth and the state’s fiscal condition, withdrew state
support and cancelled the project. The New Jersey Transit (NJT) was
the lead agency for the project, supported by the Port Authority of
New York and New Jersey (Port Authority). The project was to be
partially funded under the Federal Transit Administration’s (FTA) New
Starts program.
GAO was asked to examine (1) what would have been the mobility,
economic, and environmental benefits of the project according to major
planning studies; (2) the project cost estimates over time; and (3)
how, if at all, documents prepared as part of the New Starts process
addressed potential cost growth for the project.
GAO reviewed the literature and major project planning studies, FTA
reports, and economic and cost estimates by NJT and other planning
organizations. GAO interviewed officials from FTA, state and local
transit agencies, and local planning organizations. GAO is making no
recommendations in this report.
The Department of Transportation provided technical comments, which
GAO incorporated in the report.
What GAO Found:
Studies estimated that the Access to the Region’s Core commuter rail
project would have provided mobility benefits, but other benefits
would either have been limited or are difficult to measure. According
to various studies:
* The project would have helped meet the projected increase in travel
demand and improved mobility by doubling the number of daily peak
period trains, and significantly increasing daily trips between New
Jersey and Manhattan—from about 174,000 without the project to 254,000
with the project by 2030—while reducing transfers and station crowding
and improving reliability of service.
* The project potentially would have generated economic activity in
the region in the form of jobs and income, business activity, and
increased home values, but many economic effects were hard to predict
with certainty. For example, the extent to which the project would
shift the location of economic activity, versus providing additional
net economic activity, is uncertain.
* The project was estimated to have created limited but mostly
positive environmental effects—in particular, improved air quality—and
included measures to mitigate negative effects such as noise and storm
water runoff.
Over time, the cost estimates for the project increased from an
initial estimate of $7.4 billion in 2006. In 2008 and 2010, FTA
performed risk assessments and revised the cost estimate. FTA and NJT
agreed upon a baseline cost estimate of $8.7 billion in 2009. After
considering comments from NJT, which projected lower costs than FTA,
FTA revised its estimate and issued a cost estimate of $9.8 billion to
$12.4 billion in October 2010. As of April 2010, federal sources were
expected to fund about half the cost, with the remainder divided
between New Jersey Turnpike funds and the Port Authority.
Because the project was terminated before FTA and NJT entered into a
full funding grant agreement, there was no final agreement by all the
parties on the issue of responsibility for project cost growth. While
the Secretary of Transportation and the governor of New Jersey held
discussions on additional funding options, planning documents did not
address the source of funding of potential cost growth for the project.
Figure: Map of Proposed Access to the Region’s Core Project:
[Refer to PDF for image: map]
Depicted on the map:
Existing stations;
Existing system;
Proposed system: tunnel;
Proposed system: surface;
Proposed station expansion;
Proposed rail yard.
Specific depictions include:
Kearney Yard Midday Rail Storage (proposed);
New rail line connection for Main/Bergen and Pascack Valley lines;
New Palisades Tunnels;
NY Penn Station Expansion.
Source: DOT.
[End of figure]
View [hyperlink, http://www.gao.gov/products/GAO-12-344]. For more
information, contact David Wise at (202) 512-3834 or wised@gao.gov.
[End of section]
Contents:
Letter:
Background:
Anticipated Benefits of ARC Project:
Project Cost Estimates Increased Over Time and about Half the Planned
Funding Was from Federal Sources:
Planning Documents Did Not Determine the Source of Funding of
Potential Cost Growth:
Agency Comments:
Appendix I: Federal Transit Administration's New Starts Process:
Appendix II: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Selected Cost Estimates for the ARC Project, 2006-2010:
Table 2: Proposed Funding by Source, as of April 2010:
Figures:
Figure 1: Route of Proposed ARC Project, NJT Lines and Major Highways,
2009:
Figure 2: Selected Long-term Environmental Effects of ARC Project:
Figure 3: Relationship of Estimated Cost and Uncertainty During
Project Planning and Implementation:
Abbreviations:
ARC: Access to the Region's Core:
FTA: Federal Transit Administration:
PATH: Port Authority Trans-Hudson:
Port Authority: Port Authority of New York and New Jersey:
NJT: New Jersey Transit:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
March 9, 2012:
The Honorable Frank R. Lautenberg:
Chairman:
Subcommittee on Surface Transportation and Merchant Marine
Infrastructure, Safety, and Security:
Committee on Commerce, Science, and Transportation:
United States Senate:
Dear Mr. Chairman:
The Access to the Region’s Core (ARC) project was a planned commuter
rail project designed to help address the problem of increasing travel
demand between New Jersey and New York City. Current tunnel, bridge,
and rail infrastructure serving this corridor is already at or near
capacity; this increase in travel demand, fueled by population growth
in the region west of Manhattan and employment within Manhattan, could
result in more congestion and greater delays for commuters. The
planned project was to connect existing rail lines, build two tunnels
under the Hudson River, and expand New York Penn Station. However, on
October 27, 2010, the governor of New Jersey, citing potential cost
growth and the state’s financial condition, withdrew state support and
cancelled the project.
The New Jersey Transit (NJT) and other project sponsors began planning
for the project in 1995, and in 2003, completed the first major
planning study, which assessed numerous alternative solutions to the
problem of constrained capacity and possible routes under and across
the Hudson River. The project was further developed through the
federal environmental impact review process, completed in 2009.
[Footnote 1] In addition, both NJT and local planning organizations
conducted various studies of the expected transportation and economic
impacts of the project. Cost estimates were developed throughout the
planning process, but the final estimate and funding commitments were
still under discussion between New Jersey and the Federal Transit
Administration (FTA) when the project was cancelled.
As requested, this report addresses the following questions: (1) What
did major planning studies find would have been the estimated
mobility, economic, and environmental impacts of the ARC project? (2)
What have been the ARC project cost estimates over time, who developed
those estimates, and what sources of funding were identified? (3) How,
if at all, did documents prepared as part of FTA’s New Starts funding
process address potential cost growth for the ARC project?
To address these questions, we reviewed all major planning studies
prepared for the project and FTA reports about the project.[Footnote 2]
We also reviewed planning and economic analyses of the project done by
NJT and outside organizations. We examined the methodologies used by
the studies and determined that the studies were sufficiently reliable
for the purposes of our report. We reviewed documents from NJT and FTA
that provided or discussed various project cost estimates. We
interviewed officials from federal, state, and local agencies; private
planning organizations; and academia; specifically, FTA, Amtrak,
Office of the Governor of New Jersey, Office of the Attorney General
of New Jersey, NJT, the Port Authority of New York and New Jersey
(Port Authority), New York Metropolitan Transportation Council, North
Jersey Transportation Planning Authority, Regional Plan Association,
Tri-State Transportation Campaign, and Rutgers University. In
addition, to determine how potential cost growth was addressed, we
reviewed various declarations submitted in connection with NJT’s
response to FTA’s demand for repayment of expended project funds, the
general project agreement between NJT and the Port Authority, and
FTA’s financial assessment of NJT’s financial plan that was submitted
as part of the application to advance the project to its final design.
We conducted this performance audit from February 2011 through March
2012 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives. During our
review, we suspended our work for about 6 weeks until the resolution
of a dispute between the Department of Transportation and New Jersey
concerning the repayment of federal funds already spent on planning
the project.
Background:
Reason for the ARC Project:
Commuter demand and congestion between New Jersey and New York City
across the Hudson River is projected to increase as the limited
passenger rail infrastructure continues to age, highlighting the need
for improvements to the trans-Hudson commuter rail system into
Manhattan. Planning agencies have forecasted that, fueled by
population growth in regions west of the Hudson River and employment
within Manhattan, demand for mass transit service crossing the Hudson
River between New Jersey and nearby counties in New York and midtown
Manhattan will grow by about 38 percent by 2030. This could result in
more congestion and longer delays on existing roads, bridges,
passenger rail, and other public transportation modes crossing the
Hudson River. At the same time, the aging passenger rail
infrastructure--comprising two single-track tunnels under the Hudson
River leading to New York Penn Station--limits commuter rail capacity
into Manhattan. The 100-year-old tunnels cannot meet the access and
mobility demands of the future, given the projected growth in the
region.
In 1995, the three major local transit agencies--NJT, the Port
Authority, and the Metropolitan Transportation Authority[Footnote 3]--
jointly conducted a major investment study[Footnote 4] to consider
ways to improve access between midtown Manhattan and the growing
population west of the Hudson River. They evaluated more than 100
alternatives, including commuter railroad, bus, light rail, subway,
automobile, and ferry. The study, completed in 2003, recommended three
alternatives for advancement to the federal environment impact
process. While these alternatives would have provided more train
capacity and were expected to meet projected demand, they did not
share all of the elements of the final ARC project. In the draft
environmental impact statement, published in 2007, NJT identified the
alternative that became the final ARC project. Project development and
refinements continued until completion of the environmental review
process and entry of the project into final design in 2009. Figure 1
shows the new tracks, tunnel, and station that the project would have
built. In addition, the project would have added a yard in New Jersey
for storing trains that are not in service during the middle of the
day, five station entrances at the New York Penn Station Expansion,
and three elevator entrances that met the Americans with Disabilities
Act requirements.
Figure 1: Route of Proposed ARC Project, NJT Lines and Major Highways,
2009:
[Refer to PDF for image: map]
Depicted on the map:
Existing stations;
Existing system;
Proposed system: tunnel;
Proposed system: surface;
Proposed station expansion;
Proposed rail yard;
Interstate highways;
Streets;
Water Areas.
Specific depictions include:
Bergen line/Pascack Valley line;
Main line;
Montclair-Boonton Line;
Morristown Line;
Gladstone Branch/Northeast Corridor/North Jersey Coast Line;
Frank R. Lautenberg Secaucus Junction Station;
Mina Line/Bergen Line/Pascack Valley Line/Gladstone Branch/Raritan
Valley Line/Northeast Corridor/North Jersey Coast Line;
Secaucus Loop (proposed);
Kearney Yard Midday Rail Storage (proposed);
New rail line connection for Main/Bergen and Pascack Valley lines;
New Palisades Tunnels;
NY Penn Station Expansion.
Source: DOT.
[End of figure]
Agencies Involved and Their Roles:
NJT applied for federal funding for a portion of ARC costs through
FTA's New Starts program.[Footnote 5] Under this program, funding is
directed to public agencies on a largely competitive basis primarily
for the construction of new fixed-guideway transit systems and the
expansion of existing fixed-guideway systems. Federal funding for the
construction of New Starts projects is committed in a full funding
grant agreement, which is a multiyear funding agreement between the
federal government and a public agency. Although the ARC project was
cancelled prior to obtaining a full funding grant agreement, FTA
provided some federal funding for preliminary engineering, final
design, and a portion of construction costs for the project. The
construction funding was provided through an early system work
agreement. Appendix I provides an overview of the New Starts process.
While NJT sponsored the project and would have been the prime operator
of services on the completed project, state and local funding for ARC
would have come from the New Jersey Turnpike Authority and the Port
Authority. As part of the federal planning process for transportation,
the region's two metropolitan planning organizations--the North Jersey
Transportation Planning Authority and the New York Metropolitan
Transportation Council--adopted the project into their metropolitan
transportation improvement plans, as required for federal funding.
Termination of the Project:
While the New Jersey governor had affirmed support for the ARC project
in an April 6, 2010, letter to the Secretary of Transportation, on
October 27, 2010, the governor announced the cancellation of the
project, citing potential cost growth and the state's fiscal
condition. At the time of cancellation, NJT had completed most of the
requirements needed to obtain additional federal funding. In
particular, NJT had completed an in-depth environmental review and
received FTA's commitment of $601 million in New Starts funds to pay
for initial construction activities.[Footnote 6] At the time of
cancellation, NJT was negotiating the final cost estimate of the
project with FTA in order to obtain the full funding grant agreement.
This agreement would have provided the commitment for the full federal
share of funds for the project.
Anticipated Benefits of ARC Project:
Regional Travel Demand and Mobility:
According to the studies we reviewed, the ARC project would have
provided a significant increase in rail capacity for moving commuters
between New Jersey and New York. NJT and other planning organization
officials said that increases in capacity were a key mobility benefit
of the project. The tunnel would have added two train tracks under the
Hudson River, and as a result:
* The number of trans-Hudson peak hour trains (from 7:30 a.m. to 8:30
a.m.) would have more than doubled--from 23 to 48 trains per hour.
* The peak hour use of passenger capacity would have decreased from a
near-capacity 95 percent to 60 percent at completion, providing
additional capacity to accommodate future passenger growth.
* The benefits of other planned NJT rail expansions would have been
enhanced.
With this increase in capacity, projections made as part of the
project's environmental study showed an anticipated increase in
transit ridership as follows:[Footnote 7]
* Daily trips between New Jersey and New York Penn Station would have
increased from about 174,000 without the project to about 254,000 (a
46 percent increase) with the project by 2030.[Footnote 8]
* Considering the effects on other transit facilities, the project
would have generated about 32,500 new daily transit trips across the
Hudson by 2030.
The ARC project would have reduced the need for passengers to transfer
between trains, meaning many riders could commute on only one train.
Passenger transfers lengthen commuting times and avoiding transfers
provides a benefit to riders. As a result of the ARC project, it was
estimated that:
* Five existing NJT lines would have no longer required passengers to
transfer trains to get to Manhattan.
* Daily passenger transfers would have declined from about 32,100
without the project to 1,000 with the project, a 97 percent reduction,
as estimated in the environmental study.
* Riders traveling between New Jersey and Manhattan would have
experienced an average of 23 minutes of travel time savings per trip.
By building a second rail tunnel between New Jersey and Manhattan, the
ARC project would have increased the overall reliability of rail
service and added flexibility during service disruptions. A disruption
of service in the existing NJT tunnel for any reason can result in
major delays. Currently, one 15-minute train disruption in the
existing tunnel can delay as many as 15 other NJT and Amtrak trains.
[Footnote 9] The ARC project would have provided:
* Flexibility to reroute trains from one tunnel to the other, if
necessary.
* Continuous weekend service as new tunnels could remain open during
tunnel maintenance. (Currently, with only one tunnel, traffic must be
limited to perform necessary maintenance.)
* Better reliability, allowing for faster transit. Average scheduled
time from Newark, New Jersey, to Manhattan would decrease by 5 minutes
during peak times and 3.5 minutes off-peak.
Even with the added trans-Hudson commuters, the environmental study
found that the new station would have reduced crowding at the adjacent
New York Penn Station:
* Average passenger egress time from New York Penn Station would have
decreased from 80 to 60 seconds (a 25 percent decrease).
* The new station would have resulted in a projected decrease in peak
hour ridership at New York Penn Station of 37 percent--from about
27,800 passengers without the project to 17,200 with the project in
2030--thus alleviating crowding.
Additionally, the environmental study estimated that, in general, the
increased rail capacity across the Hudson River would have reduced the
amount of travel by automobile that would otherwise occur. Port
Authority officials told us that this increased rail capacity would
help ease road congestion for trans-Hudson commutes. Specifically, the
study projected that by 2030:
* Daily trans-Hudson automobile trips would be reduced by about 22,100
trips, or 4.9 percent, compared to the number of automobile trips
without the project.
* Daily automobile vehicle miles traveled would have been reduced by
about 590,000 miles compared to vehicle miles traveled without the
project.
* Daily automobile vehicle hours traveled would have been reduced by
about 22,000 hours compared to vehicle hours traveled without the
project.
According to the environmental study, mobility may further deteriorate
without the ARC project. The New York City region faces serious
mobility issues and, as we have mentioned previously in this report,
travel demand is projected to increase significantly. Environmental
study forecasts estimated that trans-Hudson transit travel demand
would rise from about 550,000 riders in 2005 to about 760,000 in 2030,
an increase of about 38 percent. Without the tunnel, the environmental
study projected that demand would not be met, and congestion and
delays would increase. All the major trans-Hudson crossings--NJT, the
Port Authority Trans-Hudson (PATH), and vehicular tunnels and bridges--
are at or near capacity.[Footnote 10] According to the environmental
study, the increased demand would stress the entire transportation
network, including roadway, bus, ferry, and commuter rail systems.
However, it is difficult to precisely determine the long-term effects
of not building the tunnel because various other agencies are
building, planning, or exploring the possibility of transportation
improvements that could affect overall mobility in the region. Local
transportation officials cited a number of projects that could affect
congestion and commutes in the region, although some are at the
conceptual phase, and may or may not be built. Possible projects
include the extension of a subway line from New York City to New
Jersey, Amtrak's proposal to add a train line from New Jersey into New
York City, bridge and transit tunnel improvements, a new bus terminal,
and improvements to help freight flows into New York. Thus, the
overall effect of canceling the ARC project must be understood in the
regional context, and the effect is dependent on what transpires with
these other projects.
Economic Activity:
Studies estimated the ARC project would have generated economic
activity in the region that would have affected jobs and personal
income, business activity, and home values, among other things. Most
of the economic effects were expected during the building phase of the
project. The studies we reviewed used regional economic models to
measure the economic effects. However, the results of these models
depend on larger economic conditions, such as the level of
unemployment. The results cannot be regarded as certain in all
economic conditions. The studies addressed several aspects of economic
activity as follows:
* Jobs and personal income. The environmental study estimated that
during construction the ARC project would have provided about 59,900
jobs directly onsite and total additional employment in the region of
about 98,300 jobs.[Footnote 11] The environmental study also suggested
that over the longer term, the rail line would have required an
estimated 410 jobs directly in transportation. Another study estimated
that the project would generate about 5,700 construction-related jobs
each year during the 9-year construction.[Footnote 12] In addition, 10
years after completion of the project, the same study estimated the
region would gain 44,000 new jobs as a result of improved access,
which would make the region more competitive compared to other
regions.[Footnote 13] The same study estimated that 10 years after
completion, the project would have added almost $4 billion in personal
income to the region, in 2006 dollars.
* Business activity. The ARC environmental study estimated the project
would have produced an additional $9 billion in business activity
during construction and $120 million per year in business activity
over the long term.
* Home values. Another study estimated that houses in New Jersey
communities served by the ARC project would see an average increase in
home value of $19,000, or 4.2 percent, resulting from more efficient
local travel and improved access to high paying jobs in New York City.
[Footnote 14]
* Tax revenues. Studies also indicated that increased tax revenues
would have resulted from the increases in economic activity from the
ARC project. The environmental study estimated that during
construction, $1.5 billion in federal, state, and local taxes would
have been generated, as well as an additional $16 million annually
after the project was completed. Another study estimated that the
project would result in an additional $375 million each year in
property taxes generated by local governments.[Footnote 15]
While economic benefit would accrue to the region as a result of the
project, the net magnitude of the benefit is unclear and would be
difficult to assess, for several reasons. First, the closer the
economy is to full employment, the less net effect the project would
have on total economic activity. During the planning and development
of this project, the level of employment dropped as a result of the
recession, which should have increased project benefits, but given the
duration of construction, employment levels could have varied again if
the economy rebounded. This makes assessing the net employment
benefits difficult. Second, the project's effects could be limited to
shifting the location of economic activity, rather than providing
additional net benefits. If there is less local economic growth in New
Jersey as a result of canceling the project, this growth may simply
shift to another part of the region or nation. Third, the project's
economic impact also depends on how it was financed. Deficit
financing--borrowing--provides an increase in the total amount of
spending, which will have economic effects. In contrast, financing the
project through taxes means that existing government and household
spending to some extent is simply directed a certain way, rather than
increasing the total amount of such spending. Analyzing the impact of
the project in the context of these variables--the unemployment rate
when the project is being built and project financing--was beyond the
scope of the studies we reviewed.
The net impact on housing prices is also difficult to assess. First,
the analyses--done several years ago--may not fully capture the
effects of recent declines in the housing market. Second, impacts on
the housing market throughout the metropolitan area would, to some
extent, reflect population shifts--some house prices may go up as a
consequence of improved access to transit, while prices in other less
desirable locations may go down. However, shifting the location of
households and business activity does not necessarily expand the
overall economy. Also, benefits to homeowners and commuters from the
project would significantly overlap, since they are to some extent the
same people; that is, the change in a homeowner's real estate value is
the result of the improvement in travel time.
Finally, even though the project was cancelled, all of the anticipated
economic activity was not necessarily lost. For example, according to
Port Authority officials, the Port Authority redirected funds it had
allocated to the ARC project to other projects in the region, which
could increase employment and economic activity tied to those
projects. Likewise, funds that New Jersey planned to allocate to the
ARC project were reallocated to the state's highway trust fund, which
would then support economic activity related to highway projects.
However, these highway projects would not necessarily be in the New
York City region.
Environmental Effects:
The ARC environmental study estimated the project would have created
limited, but mostly positive environmental effects. (See figure 2.)
Figure 2: Selected Long-term Environmental Effects of ARC Project:
[Refer to PDF for image: illustrated table]
Environmental area: Air quality;
Long-term effect: Positive: automobile trips diverted would decrease
emissions that contribute to existing air quality problems.
Environmental area: Land use, zoning, and public policy;
Long-term effect: Positive: land use and zoning policies would support
economic development.
Environmental area: Energy;
Long-term effect: Positive: permanent reductions in fuel consumption.
Environmental area: Environmental justice[A];
Long-term effect: Positive: enhanced accessibility to jobs.
Environmental area: Parklands;
Long-term effect: Positive: increased access to parklands.
Environmental area: Soils and geology;
Long-term effect: Positive: productive reuse of soils excavated at
sites.
Environmental area: Utilities;
Long-term effect: Positive: improvements in quality and condition of
utility lines.
Environmental area: Demographics, neighborhoods, and community
facilities;
Long-term effect: Positive: improved access to employment, community,
educational, and recreational facilities.
Environmental area: Noise and vibration;
Long-term effect: Negative: more noise and vibration from increased
train service.
Environmental area: Contaminated materials;
Long-term effect: Negative: existing contaminants in the river could
be disturbed.
Environmental area: Ecology;
Long-term effect: Negative beyond project area: need for additional
land to provide access to parking, station, and roadway; minor loss of
wetlands at the New Jersey Meadowlands.
Environmental area: Water resources;
Long-term effect: Mixed: positive for increased controls on discharges
to waterways, negative for increased runoff.
Environmental area: Visual and aesthetic conditions;
Long-term effect: Mixed: positive aesthetic impacts within rail
corridors, negative aesthetic conditions as a result of parking and
station access.
Environmental area: Archaeological and historic resources;
Long-term effect: Not fully determined in study.
Environmental area: Electric and magnetic fields;
Long-term effect: None.
Sources: NJT and GAO.
[A] Environmental justice is the fair treatment and meaningful
involvement of all people regardless of race, color, national origin,
or income with respect to the development, implementation, and
enforcement of environmental laws, regulations, and policies.
[End of figure]
The primary positive effect would have been a long-term reduction in
air pollution, although it is difficult to predict how much this
reduction in pollutants would affect the entire New York City region.
Air quality effects are of particular relevance in the development of
transit projects. FTA, pursuant to law, includes whether a project is
in an area that has not attained air quality standards required by the
Clean Air Act as a factor in selecting projects for the New Starts
program.[Footnote 16] According to the Environmental Protection
Agency, the entire New York City region is out of compliance with
certain ambient air quality standards that are designed to protect
public health. The project would reduce automobile trips and thereby
decrease emissions that contribute to existing air quality problems in
the region and related public health problems. According to the
Environmental Protection Agency, adverse health effects associated
with air pollutants include increased respiratory symptoms,
hospitalization for heart or lung disease, and premature death. Local
transportation agency officials told us that air quality factors were
important when considering the potential environmental effects of the
ARC project. Over the long term, air quality would have been
positively affected due to an estimated overall daily decrease of
about 590,000 in vehicle miles traveled in the region and about 22,100
fewer trans-Hudson vehicle trips. While longterm air quality effects
were generally positive in nature, the results of these changes would
be dispersed over the entire metropolitan area, and were too difficult
to estimate for the New York region, as noted in the environmental
study.
According to the environmental study, other adverse environmental
effects would have been short term and mitigated. Among the
environmental effects were negative effects on air quality, mainly
related to dust created by excavation and construction and exhaust
emissions from equipment, noise, potential storm water runoff,
vibration, potential soil erosion, and potential disturbance of
various contaminated sites. FTA determined that these short-term
negative effects were adequately addressed by mitigation plans.
[Footnote 17]
Project Cost Estimates Increased Over Time and about Half the Planned
Funding Was from Federal Sources:
In 2003, the first cost estimates for the concept of a new commuter
rail tunnel between New Jersey and New York--developed by NJT and
other local agencies in the major investment study--ranged from $2.9
billion to $3.6 billion (in year 2000 dollars).[Footnote 18] These
estimates were for a project that was largely conceptual and did not
rely on significant engineering design work. Further, not all project
costs and elements were included in these estimates.
In 2006, after the sponsoring agencies selected a locally preferred
alternative, FTA accepted $7.4 billion as the first cost estimate for
the project. This estimate included an expanded New York Penn Station
as well as construction, engineering, oversight, and management costs;
operational systems; rolling stock; real estate; startup cost; and
environmental mitigation. ARC project cost estimates increased over
time as shown in table 1.
Table 1: Selected Cost Estimates for the ARC Project, 2006-2010:
Estimate source: FTA approval for entry into preliminary engineering;
Source agency: FTA;
Amount: $7.4 billion;
Date: 8/4/2006;
Comments: Included elements, such as a tunnel to serve both the
existing New York Penn Station and a station expansion that was not
part of the major investment study alternatives. A locally preferred
alternative was approved in early 2006.
Estimate source: Draft Environmental Impact Study;
Source agency: NJT;
Amount: $7.4 billion;
Date: 2/9/2007;
Comments: Re-examined the preferred alternative as a result of public
comments and preliminary engineering effort.
Estimate source: Supplemental Draft Environmental Impact Study;
Source agency: NJT;
Amount: $7.6 billion;
Date: 3/14/2008;
Comments: Modified the preferred alternative, which resulted in slight
cost increase.
Estimate source: 2008 FTA Risk Assessment;
Source agency: FTA;
Amount: Range of $9.5-$12.4 billion;
Date: 8/7/2008;
Comments: Established a baseline cost estimate.
Estimate source: 2008 FTA Risk Assessment Revised;
Source agency: FTA;
Amount: Range of $8.4-$12 billion;
Date: 8/26/2008;
Comments: FTA estimate considering comments from NJT.
Estimate source: 2008 FTA Risk Assessment Final;
Source agency: FTA;
Amount: $9. billion for New Start evaluation purposes; $8.7 billion
accounting for railcar depreciation;
Date: 9/3/2008;
Comments: FTA estimate after discussions with NJT and assurances by
NJT on addressing risks.
Estimate source: Final Environmental Impact Statement;
Source agency: NJT;
Amount: $7.6 billion;
Date: 10/27/2008;
Comments: Issued after 2008 FTA Risk Assessment, and was unchanged
from earlier estimates.
Estimate source: Approval of Entry into Final Design;
Source agency: FTA;
Amount: $8.7 billion (baseline for the full funding grant agreement);
$9.2 billion (including additional cost through 2030);
Date: 1/27/2009;
Comments: The $8.7 billion estimate includes only vehicles needed in
opening year, and was to be used as the basis of the full funding
grant agreement. The $9.2 billion estimate includes vehicles for
operation through 2030.
Estimate source: Early System Work Agreement Approval Letter;
Source agency: FTA;
Amount: $8.7 billion;
Date: 8/14/2009;
Comments: Used estimate from FTA's 2009 approval of entry into final
design.
Estimate source: Estimate at Entry into Final Design;
Source agency: NJT;
Amount: $8.7 billion;
Date: 1/20/2010;
Comments: Calculated an estimate similar to FTA's 2009 approval of
entry into final design.
Estimate source: Revised Estimate at Final Design;
Source agency: NJT;
Amount: $8.7 billion;
Date: 4/1/2010;
Comments: Calculated an estimate similar to FTA's 2009 approval of
entry into final design.
Estimate source: Section 5309 New Starts Application Update;
Source agency: NJT;
Amount: $8.7 billion;
Date: 4/29/2010;
Comments: Calculated an estimate similar to FTA's 2009 approval of
entry into final design.
Estimate source: 2010 FTA Risk Assessment;
Source agency: FTA;
Amount: $10.878 billion (low); $12.232 billion (medium); $13.736
billion (high);
Date: 8/16/2010;
Comments: Risks include higher cost for design services, construction,
and risks to stakeholders.
Estimate source: NJT ARC Projected Cost Range;
Source agency: NJT;
Amount: $8.7 billion (low); $9.5 billion (medium); $10 billion (high);
Date: 8/17/2010;
Comments: NJT response to FTA's 2010 risk assessment.
Estimate source: 2010 FTA Risk Assessment Revised;
Source agency: FTA;
Amount: $9.775 billion (low); $10.847 billion (medium); $12.432
billion (high);
Date: 10/4/2010;
Comments: FTA's response to NJT comments.
Source: FTA and NJT.
Note: Costs are in year of expenditure dollars.
[End of table]
Cost Estimate Increases:
In general, changes in cost estimates throughout the process of
planning and designing a transportation project are normal and may
happen for a number of reasons.[Footnote 19] First, as a project
progresses from a concept on paper to final design and construction, a
more accurate understanding of what a project entails may evolve. The
change in cost estimates may reflect a more accurate understanding of
what actually constitutes the project. For example, according to Port
Authority officials, early in the project they learned that there were
no existing surveys of New York Penn Station, and they had to survey
the station before detailed designs could be developed. As shown in
figure 3, cost estimates are more uncertain at the beginning of a
project (the range is wide), because less is known about its detailed
design and construction requirements, and therefore the opportunity
for change is greater.
Figure 3: Relationship of Estimated Cost and Uncertainty During
Project Planning and Implementation:
[Refer to PDF for image: illustration]
The illustration is a graph plotting cost estimate against time. The
vertical axis represents cost estimates from $0 to actual cost. The
horizontal axis represents time from concept formulation through
development to implementation. The graphical representation depicts
estimate uncertaintly diminishing over time as cost estimates become
more precise.
Source: GAO.
[End of figure]
Second, costs can appear to change if they are not expressed in a
consistent manner, that is, in constant year dollars (to eliminate any
inflationary effects) versus year of expenditure dollars (that may
mask any changes in real terms because of inflation). Third, project
cost estimates are sensitive to factors such as changes to the scope
of the project. In some cases, a sponsor may reduce the scope or add
more features to the project as the design progresses. Uncertainty of
the costs is reduced, as the project scope is better defined, but
costs also may increase. Fourth, cost estimates can change as risks
are assessed and reassessed throughout project development, resulting
in the amount FTA requires project sponsors to set aside for project
contingency to increase or decrease. For example, FTA officials said
risk factors could include changes in real estate costs, new
information involving surface or subsurface ground conditions and
materials, or the degree of competition among contractors. According
to FTA officials, risks like these can affect the cost of a project,
and sponsors may never adequately address all of them, but at a
minimum both the sponsor and FTA must be aware of what those risks are.
The ARC project cost estimates increased from the $7.4 billion
estimate in 2006 for a number of reasons:
* In 2008, FTA's cost estimates ranged from $9.5 billion to $12.4
billion, based on potential scenarios in its 2008 Risk Assessment,
which not only assumed different levels of risk but also included $1.7
billion set aside for contingency.[Footnote 20] After discussions, FTA
and NJT agreed upon a baseline cost estimate of $8.7 billion in 2009.
* FTA's 2010 Risk Assessment contained the next estimated cost--as
high as $13.7 billion--as the engineers developed a more accurate
understanding of what the project entailed. However, NJT did not see
costs rising to this level and projected a lower expected cost range,
including a maximum $10 billion final cost. After considering comments
from NJT, FTA revised the cost range to $9.8 billion to $12.4 billion.
This estimate included a more refined cost estimate of potentially
higher construction and other work costs. In addition, the contingency
amount was increased due to reassessment of risks related to delays in
awarding project contracts.
Federal, State, and Local Funding Sources:
Federal, state, and local sources would have funded the ARC project,
as shown in table 2. As of April 2010, about half the estimated cost
of about $8.7 billion would have come from federal sources with the
remainder divided at the local and state levels between the Port
Authority and the New Jersey Turnpike Authority. In addition to New
Starts funds, New Jersey was planning to use certain federal highway
funds that may be used for transit capital purposes. New Jersey
planned to use part of its federal Congestion Mitigation and Air
Quality Improvement and National Highway System funding for the ARC
project. State and local funds included $3 billion from the Port
Authority, which formally approved this funding commitment. The state
of New Jersey planned to add $1.25 billion that was to have come from
increased tolls on the New Jersey Turnpike.
Table 2: Proposed Funding by Source, as of April 2010:
Dollars in millions:
Source of funds: Federal.
New Starts;
Total funds: $3,000;
Percentage of total: 34.5%.
Source of funds: Flexible federal highway funds (Congestion Mitigation
and Air Quality Improvement Program, National Highway System);
Total funds: $1,319;
Percentage of total: 15.2%.
Source of funds: American Recovery and Reinvestment Act[A];
Total funds: $130;
Percentage of total: 1.5%.
Total federal:
Total funds: $4,449;
Percentage of total: 51.1%.
Source of funds: Local;
Source of funds: Port Authority;
Total funds: $3,000;
Percentage of total: 34.5%.
Source of funds: State;
Source of funds: New Jersey Turnpike Authority;
Total funds: $1,250;
Percentage of total: 14.4%.
Source of funds: Total project;
Total funds: $8,699;
Percentage of total: 100.0%.
Source: FTA.
Note: Totals may not add due to rounding.
[A] American Recovery and Reinvestment Act of 2009, Pub L. No. 111-5.
[End of table]
In August 2009, FTA entered into an early system work agreement with
NJT. This agreement, which FTA and NJT amended in 2010, made available
about $910.3 million for certain project activities, such as tunnel
construction contracts, property and easement acquisitions in New
York, professional services related to the project's final design,
construction permits, insurance, and a contingency reserve.[Footnote
21] As of 2010, NJT expended about $271 million of the $910.3 million.
When the project was cancelled, the Department of Transportation
claimed that the $271 million in expended federal funds should be
recovered by the federal government, and New Jersey disputed this
claim. On September 30, 2011, the Department of Transportation and New
Jersey agreed that New Jersey would return $95 million, which included
$51 million in New Starts funds and $44 million in American Recovery
and Reinvestment Act funds. In addition, New Jersey agreed to spend
about $128 million in Congestion Mitigation and Air Quality
Improvement funds on transit projects approved by the Department of
Transportation. Because the project was terminated before FTA and NJT
entered into a full funding grant agreement, there was no final
commitment by all the parties to fully fund the project.
Planning Documents Did Not Determine the Source of Funding of
Potential Cost Growth:
The general project agreement, which was a document prepared as part
of the New Starts process and signed by NJT and the Port Authority in
2009, addressed potential cost growth. According to the agreement, if
costs exceeded $8.766 billion (or if less than $3 billion was provided
by FTA), both parties agreed to work together to obtain additional
funding sources. According to Port Authority officials, although both
parties signed the agreement, there was no commitment of assistance
from the Port Authority in the event that the project experienced cost
increases. Port Authority officials told us that the agency's existing
$3 billion commitment was the maximum the agency could provide to the
project, given the constraints of their overall capital program. In
the weeks preceding the project's cancellation, the Secretary of
Transportation and the governor of New Jersey held discussions on
additional funding sources for the ARC project or a reduction in
project scope. The additional funding options discussed included
increased funding by the federal government, New Jersey, and the Port
Authority; a federal railroad loan; or a public-private partnership
contribution.[Footnote 22] Because the project was terminated before a
full funding grant agreement was entered into between FTA and NJT,
there was no final agreement by all the parties on the issue of
responsibility for ARC cost growth.
Agency Comments:
The Department of Transportation reviewed a draft of this report and
provided technical comments, which we incorporated in the report.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies to interested
congressional committees, the Secretary of Transportation, and the
Administrator of the Federal Transit Administration. In addition, this
report will be available at no charge on GAO's website at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions or would like to discuss this
work, please contact me at (202) 512-2834 or wised@gao.gov. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this report. Individuals making key
contributions to this report are listed in appendix II.
Sincerely yours,
Signed by"
David J. Wise:
Director, Physical Infrastructure Issues:
[End of section]
Appendix I: Federal Transit Administration's New Starts Process:
The Federal Transit Administration (FTA) provided federal funding for
a portion of the Access to the Region's Core costs through its New
Starts program. Under this program, funding is directed to public
agencies on a largely competitive basis primarily for the construction
of new fixed-guideway transit systems and the expansion of existing
fixed-guideway systems.[Footnote 23] Federal funding for construction
of New Starts projects is committed in a document that is called a
full funding grant agreement--a multi-year agreement between the
federal government and a public agency that is subject to the
availability of appropriations.[Footnote 24] The agreement establishes
the terms and conditions for federal financial participation,
including the maximum amount of New Starts funding being committed. To
obtain this grant agreement, a project must be approved by FTA for
final design and construction and have gone through a series of steps
that make up the New Starts approval process. Among the phases of the
New Starts planning and development process are: systems planning,
alternatives analysis, preliminary engineering, and final design.
* Systems planning. Systems planning involves the continuing regional
transportation planning process carried out by metropolitan planning
organizations in urban areas throughout the United States. This
process produces long-range transportation plans and shorter-range
transportation improvement programs, along with environmental and
other analyses.
* Alternatives analysis. The analysis of alternatives examines the
benefits and costs of different options, such as light rail or bus
rapid transit, in a specific transportation corridor or in a regional
sub-area. It concludes with the selection of a locally preferred
alternative and adoption of that alternative into a fiscally
constrained long-range transportation plan. The project sponsor
submits the proposed project to FTA for evaluation so as to gain
approval to enter preliminary engineering, the next phase of
development.[Footnote 25] FTA evaluation does not include a full cost-
benefit analysis, but does consider cost-effectiveness and other
benefits of the proposed project.
* Preliminary engineering. Preliminary engineering involves the
project sponsor refining the project by examining the costs, benefits,
and impacts of different design alternatives, and completing an
analysis of environmental impacts as required by the National
Environmental Policy Act of 1969.[Footnote 26] Once preliminary
engineering is complete, FTA evaluates and rates the project to
determine whether it can be approved into final design.
* Final design. In the project's final design phase, the project
sponsor prepares final construction plans and cost estimates, and, if
needed, includes right-of-way acquisition and relocation of utilities.
After final design is complete, FTA may approve the project for a full
funding grant agreement, at which point the project may move into the
construction phase. In some cases, FTA may obligate some of the
funding expected to be provided in the full funding grant agreement
through an early system work agreement. Although not a guarantee of
full funding, an early system work agreement provides funding so that
work can begin before full funding is awarded.
[End of section]
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
David J. Wise, (202) 512-2834 or wised@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Teresa Spisak (Assistant
Director), Robert Ciszewski, Alexander Lawrence, David Hooper, Hannah
Laufe, Joshua Ormond, Amy Rosewarne, and Max Sawicky made key
contributions to this report.
[End of section]
Footnotes:
[1] The National Environmental Policy Act of 1969 (1) mandates
consideration of environmental impacts before any federal action
likely to significantly affect the environment is undertaken and (2)
establishes the environmental impact process to identify potential
environmental impacts and develop plans to mitigate negative ones.
[2] Those studies were the major investment study; draft,
supplemental, and final environmental impact statements; and various
FTA reports, such as risk assessment reports, financial assessments of
NJT's financial plan, and annual reports on funding recommendations.
[3] The Port Authority operates and maintains the region's three major
airports, six bridges and tunnels connecting New York and New Jersey,
the Port Authority Trans-Hudson (PATH) rapid transit system, and other
transportation facilities. The Metropolitan Transportation Authority
is the New York transit organization whose agencies are responsible
for New York City buses and subways, the Long Island Rail Road and
Metro-North Railroad, and various bridges and tunnels.
[4] The intent of a major investment study is to identify and compare
the costs, benefits, and impacts of a range of transportation
alternatives to provide decision-makers with the information needed to
implement the most appropriate solution in a transportation corridor.
[5] 49 U.S.C. §5309(b)(1).
[6] The $601 million was obtained through an early system work
agreement between FTA and NJT.
[7] The ridership data presented are comparisons of the project's
effect on estimated ridership to the "no-build" alternative. The no-
build alternative includes the effects of other future transportation
projects currently planned for the region.
[8] New Jersey Transit and Federal Transit Administration, Access to
the Region's Core Final Environmental Impact Statement (FEIS), October
2008.
[9] Amtrak currently uses the existing tunnel as part of its Northeast
Corridor service.
[10] PATH is a rapid transit system between New Jersey and Manhattan
operated by the Port Authority.
[11] A job is defined as one year of work for one worker.
[12] NJT, Economic Benefits of the Trans-Hudson Express Tunnel (2006).
[13] Ibid.
[14] Frank Hebbert, Juliette Michaelson, Andrew Turco, Jeff Zupan, The
ARC Effect (New York, NY: Regional Plan Association, 2010).
[15] Ibid.
[16] 49 C.F.R. §611.3(c)(1).
[17] FTA issued a Record of Decision for the ARC project in 2009,
signaling the project had satisfied National Environmental Policy Act
of 1969 requirements. In it, FTA determined that the project's
negative effects were adequately addressed by mitigation plans.
[18] In 2011 dollars, the cost estimates ranged from $3.69 billion to
$4.58 billion.
[19] Reasons for changes in project cost estimating can be found in
GAO, Cost Estimating and Assessment Guide, [hyperlink,
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: Mar. 2,
2009).
[20] FTA performs an assessment of cost and schedule risk of a New
Starts mega-project (those with $1 billion or more in capital costs)
when the project enters into the preliminary engineering phase. For
all New Starts projects, FTA performs a risk assessment before a
project enters final design and before approving a full funding grant
agreement.
[21] The early system work agreement committed $601 million in New
Starts funds, and authorized the use of about $179.2 million in
Congestion Mitigation and Air Quality Improvement funds and $130
million from the American Recovery and Reinvestment Act of 2009.
[22] The term "public-private partnership" refers to a scenario in
which the private sector assumes a greater role in the planning,
financing, design, construction, operation, and maintenance of a
transportation facility compared to traditional procurement methods.
[23] 49 U.S.C. §5309(b)(1).
[24] See Congressional Research Service, Public Transit New Starts
Program: Issues and Options for Congress (Oct. 5, 2010).
[25] FTA's rating process is applied at each development phase in
order for the project to move forward. Also, for mega-projects (those
with $1 billion or more in capital cost) FTA performs risk assessments
on such projects prior to approval into preliminary engineering.
[26] New Starts projects must fulfill the requirements of the National
Environmental Policy Act of 1969 because they involve a proposed major
federal action significantly affecting the environment. FTA requires a
project to have moved beyond the environmental scoping phase before
entering preliminary engineering. National Environmental Policy Act of
1969 scoping involves identifying the alternatives that will be
examined in the environmental documents and the significant
environmental issues that arise from the proposed project.
[End of section]
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